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STATE OF MICHIGAN COURT OF APPEALS

FAIRWAYS DEVELOPMENT OF NORTHERN MICHIGAN, INC., and RESORT NORTH DEVELOPMENT COMPANY, INC., Plaintiffs-Appellants, v SPL OF BLOOMFIELD, LLC, and KURT LAFAVE, Defendants-Appellees.

UNPUBLISHED November 12, 2009

No. 286680 Emmet Circuit Court LC No. 08-001203-CH

Before: Murphy, P.J., and Meter and Beckering, JJ. PER CURIAM. Plaintiffs appeal as of right from the trial court's order granting defendants' motion for summary disposition based on res judicata. The heart of this lawsuit at this point is whether plaintiffs' claims could have been raised or were decided by an earlier action involving these parties. We reverse and remand for further proceedings consistent with this opinion. This appeal has been decided without oral argument pursuant to MCR 7.214(E). The earlier action arose when plaintiffs1 defaulted on payments for a golf course they owned and were developing. After the sheriff's sale, plaintiffs had until June 15, 2007, to redeem the properties. Meanwhile, plaintiffs engaged in a number of transactions in which they "sold" the property to other would-be developers. Eventually, they had a contract with entities referred to here as "Chestnut," under which plaintiffs were to obtain clear title to the golf course and sell it and other assets to Chestnut. However, the day before the redemption period expired, defendants (also referred to herein simply as "SPL")2 purchased the property before plaintiffs

Although there are some differences between the two plaintiffs in this case and the actions they took below, for the sake of clarity this opinion will refer to them collectively.
2

1

Defendant LaFave is a member of SPL.

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could redeem it.3 Plaintiffs learned of the purchase on June 14, 2007, and made no attempt to also redeem the property or to seek an extension of the redemption period. Chestnut sued both plaintiffs and SPL on a number of grounds, encompassing specific performance and a quiet-title action. Chestnut alleged that plaintiffs held title to the property and that SPL had no right to redeem the property. Litigation proceeded, with SPL responding at every step. When SPL moved for summary disposition on the quiet-title count, plaintiffs responded, arguing that SPL's "inequitable" action of a last-minute redeeming of the property at least merited an equitable extension of the right to redeem. However, they did not seek that as a remedy or separately move the court for that remedy. Instead of going to trial, Chestnut reached an agreement with SPL to dismiss the action with prejudice. However, plaintiffs would not agree to this, so instead Chestnut moved the court to dismiss without prejudice. SPL objected to dismissing without prejudice, and after a hearing on the motion, the trial court agreed. The order expressly states that dismissal is "with prejudice." Plaintiffs did not appeal that order. Plaintiffs sued SPL to quiet title, and SPL moved for summary disposition on the theory that the February 12, 2008, order bars the present suit under the doctrine of res judicata (claim preclusion). The trial court agreed, noting that res judicata requires "a prior decision on the merits," that "both actions involve the same parties or their privies," and that "the matter in the second case was or could have been resolved in the first." The court found that a voluntary dismissal with prejudice acts as an adjudication on the merits, so the first requirement was met. The court then found that all the parties had been parties to the earlier action. Even though plaintiffs were SPL's codefendants in the earlier suit, the court noted that plaintiffs were parties and were in privity with Chestnut, the plaintiff in the earlier suit. That satisfied the "same parties" requirement of the doctrine. Finally, the court found that under Michigan's "broad view" of res judicata, the issue of who held legal title was squarely before the court and it had found questions of fact existed on the matter. However, when the motion for dismissal was made, plaintiffs could have filed a cross-claim "in their own name rather than tagging along with the then plaintiff"

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Michigan Law